Foreign holidays, fancy nights out and new cars are among the many things that Britons have sacrificed in the face of the worst recession for decades. But there is one thing that it seems much of the population cannot go without – make-up.

L'Oréal, the French cosmetic company whose brands include Lancôme, Garnier and the Body Shop, today reported higher than expected profits of €1.37bn (£1.2bn) for the first half of the year. Shares jumped 10% on the news.

At Boots, the UK market leader, sales of beauty products have increased in recent months. Peter Bainbridge, commercial director of Boots' beauty business, which includes No 7, the biggest selling brand, said: "Customers are looking for an inexpensive treat to make them feel good and a small thing, like a lipstick, can make a big difference to someone's day."

According to analysts at research firm Mintel, the UK beauty market has continued to grow despite the recession.

"A recession does not change people's insecurities about the way they look," says Alexandra Richmond, a beauty analyst at Mintel. "They may have given up their long-haul holiday this year but the reality is make-up is a small indulgence in the scheme of things."

The link between make-up and recession is not new. When an executive at Estée Lauder noted that sales of expensive lipsticks soared in the wake of the 9/11 terror attacks, he dubbed it the Lipstick Index, an alternative economic indicator which sees make-up sales rise in a downturn.

But just as the causes of recession are different this time, so are make-up choices. The consensus in beauty circles is that the Lipstick Index has been replaced by the "Foundation Factor" after L'Oréal noted a 15% sales jump as women sought the perfect skin tone above a glossy pout. "It's not about warpaint anymore, says Grita Loebsack, head of L'Oréal UK. "Today women prefer more of a natural look – what we call the 'make-under' – they are putting on a brave face and want to look their best."

The company said women told them they would give up a lot before they sacrificed products in their beauty regime: "They told us: 'I will buy a cheap shower gel for my family but I will not give up my Kerastase shampoo, I will hide it in the bathroom cabinet.' "

The market has not been immune to the downturn with the top end squeezed as even the wealthy shied away from the beauty counters in stores and at airports, at the height of the financial crisis.

L'Oréal, the world's biggest cosmetics firm, saw global demand for its premium brands such as Lancôme and Kiehl's drop sharply with the company suffering its first ever quarterly sales decline at the end of last year. But it sounded a positive note yesterday, stating that sales had started to recover as extra advertising – it has just hired Cheryl Cole as a new "face" – and new, cheaper products persuaded women they were "worth it".

The fastest growing areas of the market are anti-ageing creams, perfumes and mascara. Loebsack said the market was benefiting from structural change as life expectancies and the "science part" behind skincreams improved. Boots scored a major success with Protect & Perfect cream after scientists endorsed its efficacy. "If a product promises something it doesn't deliver consumers won't buy it again and that has repercussions for the brand," Loebsack said. "You can't over-promise or over-claim, especially when you are an established brand."

While classics such as Chanel No5, Elnett hairspray and Touche Eclat are fixtures on retailers' shelves, the market increasingly turns on new, more technical, products with vibration – in everything from mascaras to razors – currently a key feature. High-profile launches have included Oscillation, a "powermascara" from Lancôme with a wand that delivers "7,000 oscillations per minute", and the million-selling Garnier Eye Roll-on, which plumps up tired eyes with a caffeine infused potion.

Some analysts argue "trading down" is increasingly a feature of the consumer landscape – and here to stay – but Loebsack says women have always mixed luxury and value: "The overall make-up market is in very strong growth both in the luxury and mass market segment," she said. "When I am at the gym I peer into women's make-up bags and they will have a Lancôme mascara, a Max Factor foundation and a No 7 eyeshadow."

Making do with makeup

The correlation between a happy cosmetics industry and a miserable economy has been known for some time. "When lipstick sales go up, people don't want to buy dresses," Leonard Lauder, chairman of Estée Lauder Cosmetics, once said, but then he would say that (and he seemed to get the equation the wrong way round). 9/11, for example, was a good day to bury bad news and, as Lauder intimated, a very good day for lipstick, with brands like MAC seeing sales rise by 12% in the United States in the three weeks after the attacks while the rest of the economy tanked. This is known – no, really, it is – as the lipstick index.

Glossy magazines and, predictably, glossy cosmetic companies always posit this as though it were a fabulously feminine show of strength. I take a somewhat different view, perhaps having been nauseated for ever by the delightfully named Georgette Mosbacher, chief executive of Borghese Cosmetics, who, when asked to explain why her company's sales had risen post-9/11, replied – with a presumably painted po-face – that women were buying lipstick with "a sense of defiance that 'they' aren't going to disrupt our lives and take away our simple pleasures".

Yeah, take that, Osama!

The real story here is not just that women are buying more cosmetics but that they are buying less fashion. Cosmetics have always been the scaffold of the fashion world, with perfume buffering fragile clothing sales. Those sales are now wilting like a woman on an overly precarious stiletto, suggesting that many women are turning to cosmetics not because they are being "defiant", but because they have a special night planned but know it makes more sense to wear something they already have and compensate with new slap from Boots. This is less about "simple pleasures" and more about making do.